12 - 2 Learning Objectives

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Transcript 12 - 2 Learning Objectives

Products and Services
for Consumers
Lecture 9
Learning Objectives
• The importance of offering a product suitable for the
intended market
• The relationship between product acceptance and the
market into which it is introduced
• The importance of quality and how quality is defined
• Country-of-origin effects on product image
• Physical, mandatory, and cultural requirements for
product adaptation
• The need to view all attributes of a product in order to
overcome resistance to acceptance
12 - 2
Global Perspective
Hong Kong – Disney Rolls the Dice Again
• Tokyo Disneyland – successful
• EuroDisney – disaster
• Hong Kong Disneyland – open for business
• The opportunities and challenges for international
marketers of consumer goods and services today is great
and diverse.
- Market offerings
- Business-to-consumer marketing
• Quality products and services that meet the needs and
wants of consumers at an affordable price should be the
goal of any marketing firm.
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Shift to a customer’s market
Increased customer knowledge
The customer defines quality
The cost and quality of a product are among the most
important criteria by which purchases are made
• Quality can be defined on two dimensions:
- Market-perceived quality
- Performance quality
• Most consumers expect performance quality to be a given
• In many industries quality is measured by objective third
- JD Power and Associates
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Maintaining Quality
• Damage in the distribution chain
- Russian chocolate
• Quality is essential for success in today’s competitive
global market
• The decision to standardize or adapt a product is crucial
in delivering quality
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Physical or Mandatory Requirements and
• Product homologation
• Product adaptation dictated by the following
- Legal
- Economic
- Political
- Technological
- Climate
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Green Marketing and Product Development
• Critical issues affecting product development:
- Control of the packaging component of solid waste
- Consumer demand for environmentally friendly
• European Commission guidelines for ecolabeling
• Laws to control solid waste
Green marketing is a term used to define concern
with the environmental consequences of a variety
of marketing activities.
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Products and Culture
• A product is the sum of the physical and psychological
satisfactions it provides the user.
- Primary function
- Psychological attributes
• The need for cultural adaptation is often necessary,
affected by how the product conforms with:
- Norms
- Values
- Behavior patterns
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Innovative Products and Adaptation
• Determining the degree of newness as perceived by the
intended market
• Diffusion
• Established patterns of consumption and behavior
• Foreign marketing goal: gaining the largest number of
consumers in the market in the shortest span of time
- Probable rate of acceptance
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Diffusion of Innovations
• Crucial elements in the diffusion of new ideas:
- An innovation
- Which is communicated through certain channels
- Over time
- Among the members of a social system
• The element of time
• Variables affecting the rate of diffusion of an object:
- The degree of perceived newness
- The perceived attributes of the innovation
- The method used to communicate the idea
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Five Characteristics of an Innovation
1. Relative advantage
2. Compatibility
3. Complexity
4. Trialability
5. Observability
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Production of Innovations
• Inventiveness of companies and countries
• Expenditures
• Japanese solutions
- American-style education programs
- American design centers
• New ideas come from a growing variety of sources,
countries, acquisitions, and even global collaborations
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Analyzing Product Components for Adaptation
• Insert Exhibit 12.1 – Product Component Model
Exhibit 12.1
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Marketing Consumer Services Globally
• Consumer services characteristics:
- Intangibility
- Inseparability
- Heterogeneity
- Perishability
• A service can be marketed both as an industrial
(business-to-business) or a consumer service
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Services Opportunities in Global Markets
• Tourism
• Transportation
• Financial services
• Education
• Communications
• Entertainment
• Information
• Health care
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Barriers to Entering Global Markets for
Consumer Services
• Protectionism
• Restrictions on transborder data flows
• Protection of intellectual property
• Cultural barriers and adaptation
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Brands in International Markets
• Very important
• Most valuable resource a company has
A global brand is defined as the worldwide use of
a name, term, sign, symbol, design, or combination
thereof intended to identify goods or services of
one seller and to differentiate them from those of
12 - 17
Top Twenty Brands
Rank 2005/2004
2005 Brand Value
2004 Brand Value
Country of
1/1 Coca Cola
$67, 394
2/2 Microsoft
3/3 IBM
53, 791
4/4 GE
46, 996
5/5 Intel
6/8 Nokia
7/6 Disney
8/7 McDonalds
9/9 Toyota
10/10 Marlboro
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Top Twenty Brands (continued)
Rank 2005/2004
2005 Brand Value
2004 Brand Value
Country of
11/11 MercedesBenz
12/13 Citi
13/12 HP
14/14 Am Ex
15/15 Gillette
16/17 BMW
17/16 Cisco
18/44 L Vuitton
19/18 Honda
20/21 Samsung
S. Korea
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Global Brands
• The Internet and other technologies accelerate the pace of
the globalization of brands
• Ideally gives the company a uniform worldwide image
• Balance
• Ability to translate
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National Brands
• Acquiring national brand names
• Using global brand names
• Nationalistic pride impact on brands
• Use global brands where possible and national brands
where necessary
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Country-of-Origin Effect
Country-of-origin effect (COE) can be defined as any
influence that the country of manufacture, assembly, or
design has on a consumer’s positive or negative
perception of a product.
• Consumers have broad but somewhat vague
stereotypes about specific countries and specific
product categories that they judge “best.”
• Ethnocentrism
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Country-of-Origin Effect and Global Brands
• Countries stereotyped on the basis of whether they are
industrialized, in the process of industrializing, or
• The more technical the product, the less positive is the
perception of one manufactured in a less-developed or
newly industrializing country
• Fads often surround product from particular countries or
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Private Brands
• Growing as challengers to manufacturers’ brands
• Private labels:
- Provide the retailer with high margins
- Receive preferential shelf space and in-store
- Are quality products at low prices
• Must be competitively priced and provide real consumer
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• The growing globalization of markets must be balanced
with the continuing need to assess all markets for those
differences that might require adaptation for successful
• In spite of the forces of homogenization, consumers also
see the world of global symbols, company images, and
product choice through the lens of their own local culture
and its stage of development and market sophistication.
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• Each product must be viewed in light of how it is
perceived by each culture with which it comes in contact.
• Analyzing a product as an innovation and using the
Product Component Model may provide the marketer
with important leads for adaptation
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Products and Services for
Lecture 10
Learning Objectives
• The importance of derived demand in industrial markets
• How demand is affected by technology
• Characteristics of an industrial product
• The importance of ISO 9000 certification
• The growth of business services and nuances of their
• The importance of trade shows in promoting industrial
• The importance of relationship marketing for industrial
products and services
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Global Perspective
Intel, the Boom and the Inescapable Bust
• In industrial markets, including global ones, what goes up
must come down
• The majority of export sales for industrialized countries is
• Issues of standardization versus adaptation have less relevance
to marketing industrial goods than consumer goods
• Factors accounting for greater market similarities in industrial
goods customers versus consumer goods customers:
- The inherent nature of the product
- The motive or intent for the user differs
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Major Categories U.S. Exports
• Insert Exhibit 13.1
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Demand in Global Business-to-Business
• Demand in industrial markets is by nature more volatile
• Stages of industrial and economic development affect
demand for industrial products
• The level of technology of products and services make
their sales more appropriate for some countries than
Derived demand can be defined as demand
dependent on another source.
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The Volatility of Industrial
• Cyclical swings in demand
- Professional buyers tend to act in concert
- Derived demand accelerates changes in markets
• Measures to manage volatility:
- Maintain broad product lines
- Raise prices faster and reduce advertising
expenditures during booms
- Ignore market share as a strategic goal
- Eschew layoffs
- Focus on stability
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Derived Demand Example
• Insert Exhibit 13.2
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Stages of Economic Development
• Stage 1 – the traditional society
• Stage 2 – preconditions for takeoff
• Stage 3 – take off
• Stage 4 – drive to maturity
• Stage 5 – the age of mass consumption
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Technology and Market Demand
• Trends spurring demand for technologically advanced
- Expanding economic and industrial growth in Asia
- The disintegration of the Soviet empire
- The privatization of government-owned industries
• The companies with the competitive edge will be those
whose products are:
- Technologically advanced
- Of the highest quality
- Accompanied by world-class service
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Quality and Global Standards
• Perception of quality rests solely with the customer
- Level of technology reflected in the product
- Compliance with standards that reflect customer
- Support services and follow-through
- Price relative to competitive products
• Relevant quality features
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Quality is Defined by the Buyer
• How well a product meets the specific needs of the buyer
• The price-quality relationship
• Product design must be viewed from all aspects of use
- Climate
- Terrain
• Total Quality Management (TQM)
• Lack of universal standards
• Country-specific standards
• The metric system
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ISO 9000 Certification: An International
Standard of Quality
• Positively affects the performance and stock prices of
• Certification of the existence of a quality control system
a company has in place to ensure it can meet published
quality standards
• Generally voluntary
• EU Product Liability Directive
• Now a competitive marketing tool in Europe and around
the world
• The ACSI approach
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Business Services
• For many industrial products the revenues from
associates services exceed the revenues from the
- Cellular phones
- Printers
• Leasing capital equipment
• Services not associated with products
- Boeing at-sea-satellite-launch services
- Ukrainian cargo company space rental on giant jets
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After-Sale Services
• Installation
• Training
• Spare and replacement parts
- Delivery time
- Cost of parts
• Service personnel
• Crucial in building strong customer loyalty
• Almost always more profitable than the actual sale of the
machinery or product
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Other Business Services
• Client followers
• Mode of entry
- Licensing
- Franchising
- Direct investment
• Protectionism
• Restrictions on cross-border data flows
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Expansion of U.S. Law Firms in Selected Cities
• Insert Exhibit 13.3
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Trade Shows: A Crucial Part of Business-toBusiness Marketing
• Secondary methods for marketing:
- Advertising in print media
- Catalogs
- Web sites
- Direct mail
• Trade shows have become the primary and most
important vehicle for doing business in many foreign
• Total annual media budget spent on trade events:
- Europeans – 22 percent
- Americans – 5 percent
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Trade Shows: A Crucial Part of Business-toBusiness Marketing (continued)
• Trade shows:
- Provide the facilities for a manufacturer to exhibit and
demonstrate products to potential users
- Allow manufacturers to view competitors products
- Are an opportunity to create sales and establish
relationships with agents, distributors, franchisees,
and suppliers
• Online trade shows:
- Become useful in difficult economic and/or political
- Are obviously a less than adequate substitute for live
trade shows
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Relationship Marketing in Business-to-Business
• It is not a matter of selling the right product the first time,
but rather of continuously changed the product to keep it
right over time.
• The objective of relationship marketing is to make the
relationship an important attribute of the transaction,
thus differentiating oneself from competitors.
• Using the Internet to facilitate relationship building and
- Cisco Systems
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• Industrial marketing requires close attention to the exact
needs of customers.
• Industrial goods marketers must pay close attention to
the level of economic and technological development of
each market to determine the buyer’s assessment of
• The demand for products and services in business-tobusiness markets is by nature more volatile than in most
consumer markets.
• The demand also varies by level of economic
development and the quality of educational systems
across countries.
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Summary (continued)
• Product or service quality is defined by customers.
• Global quality standards such as ISO 9000 are being
• After-sale services are an important aspect of industrial
• Trade shows are an especially important promotional
medium in business-to-business marketing.
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Marketing Channels
Lecture 11
International Marketing, 13/e
© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
Learning Objectives
• The variety of distribution channels and how they affect cost
and efficiency in marketing
• The Japanese distribution structure and what it means to
Japanese customers and to competing importers of goods
• How distribution patterns affect the various aspects of
international marketing
• The growing importance of e-commerce as a distribution
• The functions, advantages, and disadvantages of various kinds
of middlemen
• The importance of middlemen to a product’s success and the
importance of selecting and maintaining middlemen
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Global Perspective A Single Stick of Doublemint
Today – 18 Billion Tomorrow
• A product must be made accessible to the target market at an
affordable price
• Getting the product to the target market can be a costly
• Forging an aggressive and reliable channel of distribution may
be the most critical and challenging task facing the
international marketer
• Competitive advantage will reside with the marketer best able
to build the most efficient channel from among the alternatives
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Channel-of-Distribution Structures
• All consumer and industrial products eventually go through a
distribution process.
- Physical handling and distribution of goods
- Passage of ownership
- Buying and selling negotiations between producers and
- Buying and selling negotiations between middlemen and
• Each country market has a distribution structure through
which goods pass from producer to user.
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Import-Oriented Distribution Structure
• Demand exceeds supply
• The customer seeks the supply from a limited number of
• Distribution systems are local
• Few countries fit the import-oriented model today
In an import-oriented or traditional distribution
structure, an importer controls a fixed supply of goods
and the marketing system develops around the
philosophy of selling a limited supply of goods at high
prices to a small number of affluent customers.
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Japanese Distribution Structure
1. A structure dominated by many small middlemen dealing
with many small retailers
2. Channel control by manufacturers
3. A business philosophy shaped by a unique culture
4. Laws that protect the foundation of the system
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Comparison of Distribution Channels between
the United States and Japan
• Insert Exhibit 14.1
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High Density of Middlemen
• Not unusual for consumer goods to go through three or four
intermediaries before reaching the consumer
• In Japan, small stores account for 57.7 percent of retail food
• In the U.S., small stores generate 19.2 percent of food sales
• Japan has a large number of independent groceries and
bakers, unlike America with an emphasis on supermarkets,
discount food stores, and department stores
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Channel Control
1. Inventory financing
2. Cumulative rebates
3. Merchandise returns
4. Promotional support
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Business Philosophy
• Emphasizes loyalty, harmony, and friendship
• Supports long-term dealer-supplier relationships
• The cost of Japanese consumer goods are among the highest in
the world
• Japanese law gives the small retailer enormous advantage over
the development of larger stores
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Large-Scale Retail Store Law and Its Successor
• Daitenho – the Large-Scale Retail Store Law
- Large stores must have approval from the prefecture
- All proposals first judged by the Ministry of International
Trade and Industry (MITI)
- Then, if all local retailers unanimously agreed, the plan was
- Could be a lengthy process
- Applied to both domestic and foreign companies
• Replaced by the Large-Scale Retail Store Location Act of June
- MITI out of the process
- Relaxed restrictions
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Changes in the Japanese Distribution System
• Structural Impediments Initiative
• Deregulation
• Wal-Mart
• “New” retailers
• The Internet
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Trends: From Traditional to Modern Channel
• European retailers merging with former competitors and other
countries to form Europe-wide enterprises
• Foreign retailers attracted by the high margins and prices
• The Internet may be the most important trend affecting
• Covisint
• GlobalNetXchange
• E-commerce
• 7-Eleven competes with FedEx and UPS
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Distribution Patterns
• General patterns
Middlemen services
Line breadth
Costs and margins
Channel length
Nonexistent channels
Blocked channels
Power and competition
Retail patterns:
Size patterns
Direct marketing
Resistance to change
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Alternative Middleman Choices
• Seller must exert influence over two sets of channels:
- One in the home country
- One in the foreign-market country
• Agent middlemen – represent the principal rather than
• Merchant middlemen – take title to the goods and buy and sell
on their own account
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Home-Country Middlemen
Manufacturer’s retail stores
Global retailers
Export management companies
Trading companies
U.S. export trading companies
Complementary marketers
Manufacturer’s export agent
Home-country brokers
Buying offices
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Home-Country Middlemen (continued)
Selling groups
Webb-Pomerene export associations
Foreign sales corporation
Export merchants
Export jobbers
12 - 64
Foreign-Country Middlemen
Manufacturer’s representatives
Foreign-country brokers
Managing agents and compradors
Import jobbers, wholesalers, and retailers
12 - 65
Government-Affiliated Middlemen
• Marketers must deal with governments in every country of the
• Products, services, and commodities for the government’s own
use are always procured through government purchasing
offices at federal, regional, and local levels
• Efficiency of public sector versus the private sector
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Factors Affecting Choice of Channels
Capital requirements
12 - 67
Locating, Selecting, and Motivating Channel
• Locating middlemen
• Selecting middlemen
- Screening
- The agreement
• Motivating middlemen
• Terminating middlemen
• Controlling middlemen
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The Internet
• E-commerce is used to market:
- Business-to-business (BSB) services
- Consumer services
- Consumer and industrial products
• E-commerce is more developed in the U.S. than in the rest of
the world
• B2B enables companies to cut costs in three ways:
- Reduces procurement costs
- Allows better supply-chain management
- Makes possible tighter inventory control
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Concerns for e-Vendors
Local contact
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Global Perspective
An Export Sale: From Trade Show to Installation
• Specific export mechanics occur when goods are
shipped from one country to another.
• The Internet has helped speed up this process
• Most countries control the movement of goods
crossing their borders – imports and exports
• The international marketer must meet the legal
requirements involved in moving goods from one
country to another
- Export regulations
- Import regulations
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Export Restrictions
• Controlled by the Bureau of Industry and Security (BIS)
of the Department of Commerce
• Export Administration Regulations
- Serve the national security, foreign policy, and
nonproliferation interests
- Includes some export controls to protect the U.S. from
the adverse impact of the unrestricted export of
commodities in short supply
• NLR (no license required)
12 - 72
Determining Export Requirements
• The exporter must determine the appropriate license for
the product (general or validated):
1. Select the proper classification number
2. Decide if the items have end-use restrictions
3. Determine the ultimate end customer and ultimate
end uses of the product
• The details of exporting must be followed to the letter
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• ELAIN ( Export License Application and Information
• STELA (System for Tracking Export License
• ERIC (Electronic Request for Item Classification)
• SNAP (Simplified Network Application Process)
12 - 74
Import Restrictions
• Tariffs
• Exchange permits
• Quotas
• Import licenses
• Standards
• Boycotts
• Voluntary agreements
• Other restrictions
12 - 75
Terms of Sale
• CIF (cost, insurance, freight)
• C&F (cost and freight)
• FAS (free alongside)
• FOB (free on board)
• EX (named port of origin)
12 - 76
Getting Paid: Foreign Commercial Payments
• Letter of credit
- Afford the greatest degree of protection for the seller
- Can be revocable or irrevocable
- Not a guarantee of payment to the seller
• Bills of exchange
- Also known as dollar drafts
- The seller assumes all risk until the actual dollars are
- Sight draft
- Arrival draft
12 - 77
- Date draft
Getting Paid: Foreign Commercial Payments
• Cash in advance
- Places unpopular burdens on the customer
• Open accounts
- Not generally made in foreign trade
- Leaves sellers at a disadvantage
• Forfaiting
- The seller makes a one-time arrangement with a
financial institution to take over responsibility for
collecting the account receivable
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Export Documents
• Export documents
• Consular invoice of certificate of origin
• Bill of lading
• Commercial invoice
• Insurance policy or certificate
• Licenses
• Other documents
12 - 79
Packing and Marking
• Export packaging must consider:
- Protection against rough handling, climate, pilferage
- Effect of gross weight on import fees
• All countries regulate the marking of imported goods and
- All markings must conform exactly to the data on the
export documents
12 - 80
Customs-Privileged Facilities
• Foreign trade zones (FTZs)
- Drawback
• Offshore assembly (Maquiladoras)
- Originated in Mexico in the early 1970’s
Customs-privileged facilities are areas where
goods can be imported for storage and/or
processing with tariffs and quota limits postponed
until the products leave the designated areas.
12 - 81
• Logistics management is a total systems approach to
management of the distribution process that includes all
activities involved in:
- Physically moving raw material
- In-process inventory
- Finished goods inventory from the point of origin to
the point of use or consumption
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Interdependence of Physical Distribution
• A physical distribution system involves:
- Physical movement of goods
- Location of plants and warehousing (storage)
- Transportation mode
- Inventory quantities
- Packing
• Total cost of the system
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Benefits of a Physical Distribution System
• Cost advantages
• Optimal inventory levels
• Optimal production capacity
• More dependable delivery service to the market
• Can render the natural obstructions created by geography
les economically critical for the multinational marketer
12 - 84
Export Shipping and Warehousing
• Common shipping modes: ocean shipping, airfreight, air
express, and parcel post
• Containerization
• Intermodal services
• Intermodal marketing companies (IMCs)
• Rail transportation
• Complete logistics management services
- FedEx
• Merge-in-transit
12 - 85
Foreign Freight Forwarder
• Licensed by the Federal Maritime Commission
• Arranges for the shipment of goods as the agent for an
- Arranges for complete shipping documentation
- Provides information and advice on routing and
scheduling, rates and related charges, consular and
licensing requirements, labeling requirements, and
export restrictions
- Offers shipping insurance, warehouse storage,
packing and containerization, and ocean cargo or
airfreight space
12 - 86
International Logistics and Supply Chain
• Information technology now allows communication with
participants in real time via a single connection point
• NetLinx
• Descartes
• BLP providers or integrators
- UPS Logistics Group
12 - 87
Terrorism and Logistics
• Cargo and container security initiative (CSI)
- 24-hour rule
• Customs-Trade Partnership against Terrorism (C-TPAT)
- Augments the 24-hour rule by extending security
procedures throughout the supply chain
- Only applies to U.S. importers
• Electronic tracking (C-TPAT-Plus)
Bar codes
Optical character recognition
- Cellular
- Satellite
- Ultra-wide-band
- Bluetooth
12 - 88
• The international marketer has a broad range of alternatives
for developing a distribution system.
• Three primary alternatives for using agent middlemen:
- Agent middlemen
- Merchant middlemen
- Government-affiliated middlemen
• Channel structure may vary from nation to nation or from
continent to continent.
• Information and advice are available relative to the
structuring of international distribution systems.
• Traditional channels are being challenged by the Internet,
which is offering an ever-wider range of possibilities for
entering foreign markets.
12 - 89
• The mechanics of exporting require little room for interpretation or
• The very nature of the regulations and restrictions surrounding importing
and exporting can lead to frequent and rapid change.
- The manufacturer must keep abreast of all foreign and domestic
changes in requirements and regulations.
• Foreign-freight-forwarders can handle many details for a nominal fee.
• Transportation mode affects total product cost.
• A physical distribution system determines everything from plant location to
final customer delivery in terms of the most efficient use of capital
investment, resources, production, inventory, packaging and
• The continuous innovations in information technology, the Internet, and
software programs can minimize much of the burden associated with global
12 - 90
Integrated Marketing
Communications and
International Advertising
Lecture 12
International Marketing, 13/e
© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
Learning Objectives
• Local market characteristics that affect the advertising and
promotion of products
• The strengths and weaknesses of sales promotion and public
relations in global marketing
• When global advertising is most effective; when modified
advertising is necessary
• The effects of a single European market on advertising
• The effect of limited media, excessive media, paper and
equipment shortages, and government regulations on
advertising and promotion budgets
• The communication process and advertising misfires
12 - 92
Global Perspective
Barbie Versus Mulan
• Integrated marketing communications (IMC)
- Advertising
- Sales promotions
- Trade shows
- Personal selling
- Direct selling
- Public relations
• Objective: the successful sale of a product or service
12 - 93
Sales Promotions in International Markets
• Sales promotions
- Marketing activities that stimulate consumer
purchases and improve retailer or middlemen
effectiveness and cooperation
- Short-term efforts directed to the consumer or retailer
to achieve specific objectives
• In markets with media limitations the percentage of the
promotional budget allocated to sales promotions may
have to be increased
• Product sampling
12 - 94
International Public Relations
• Bridgestone/Firestone Tires safety recall
• Global workplace standards
• Building an international profile
• Corporate sponsorships
The role of public relations (PR) is creating good
relationships with the popular press and other
media to help companies communicate messages to
customers, the general public, and governmental
12 - 95
International Advertising
1. Perform marketing research.
2. Specify the goals of the communication.
3. Develop the most effective message(s) for the market
segments selected.
4. Select effective media.
5. Compose and secure a budget.
6. Execute the campaign.
7. Evaluate the campaign relative to the goals specified.
12 - 96
Top 20 Global Advertisers ($ millions)
• Insert Exhibit 16.1
12 - 97
Advertising Strategy and Goals
• Marketing problems require careful marketing research
and thoughtful and creative advertising campaigns in
country, regional, and global markets, respectively.
• Increased need for more sophisticated advertising
• Balance between standardization of advertising themes
and customization.
• Consumer cultures
12 - 98
Product Attributes and Benefit Segmentation
• Different cultures usually agree on the benefit of the
primary function of a product
• Other features and psychological attributes of the item
can have significant differences
- Cameras
- Yogurt
- Almonds
• Blue Diamond – assumes that no two markets will react
the same, that each has its own set of differences, and
that each will require a different marketing approach and
12 - 99
Regional Segmentation
• Pan-European communications media highlighting need
for more standardized promotional efforts
• Costs savings with a common theme in uniform
promotional packaging and design
• Legal restrictions slowly being eliminated
12 - 100
Global Advertising and the Communications
• If not properly considered, the different cultural contexts
can increase the probability of misunderstandings
• Effective communication demands the existence of a
“psychological overlap” between the sender and the
• It can never be assumed that “if it sells well in one
country, it will sell in another”
12 - 101
The International Communications Process
• Insert Exhibit 16.4
12 - 102
Legal Constraints
• Laws that control comparative advertising vary from
country to country in Europe.
• Comparative advertising
• Advertising of specific products
• Control of advertising on television
• Accessibility to broadcast media
• Limitations on length and number of commercials
• Internet services
• Special taxes that apply to advertising
12 - 103
Linguistic Limitations
• Language is one of the major barriers to effective
communication through advertising
• Translation challenges
• Low literacy in many countries
• Multiple languages within a country
12 - 104
Cultural Diversity
• Knowledge of cultural diversity must encompass the total
advertising project
• Existing perceptions based on tradition and heritages are
often hard to overcome
• Subcultures
• Changing traditions
12 - 105
Media Limitations and Production and Cost
• Media limitations may diminish the role of advertising in
the promotional program
• Examples of production limitations:
- Poor-quality printing
- Lack of high-grade paper
• Low-cost reproduction in small markets poses a problem
in many countries
12 - 106
Media Planning and Analysis –
Tactical Considerations
• Availability
• Cost
• Coverage
• Lack of market data
• Newspapers
• Magazines
12 - 107
Media Planning and Analysis –
Tactical Considerations (continued)
• Radio and television
• Satellite and cable TV
• Direct mail
• The Internet
• Other media
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Campaign Execution and Advertising Agencies
• Managed by advertising agencies
- Local domestic agency
- Company-owned agency
- Multinational agency with local branches
• Compensation
- Commonly 15 percent throughout the world
- Some companies moving to reward-by-results
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International Control of Advertising: Broader
• Consumer criticism
• Deceptive advertising
• Decency and blatant use of sex
• Self-regulation
• Government regulations
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• An integrated marketing communications (IMC) program
includes coordination among advertising, sales management,
public relations, sales promotions, and direct marketing.
• Currently companies are basing their advertising strategies on
national, subcultural, demographic, or other market segments.
• The major problem facing international advertisers is
designing the best messages for each market served.
• The availability and quality of advertising media vary
substantially around the world.
• Advances in communication technologies are causing dramatic
changes in the structure of the international advertising and
communications industries.
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Pricing for
Lecture 13
International Marketing, 13/e
© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
Learning Objectives
• Components of pricing as competitive tools in
international marketing
• The pricing pitfalls directly related to international
• How to control pricing in parallel imports or gray
• Price escalation and how to minimize its effect
• Countertrading and its place in international marketing
• The mechanics of price quotations
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Global Perspective
The Price War
• Setting the right price for a product or service can be the
key to success or failure
• An offering’s price must reflect the quality and value the
consumer perceives in the product
• As the globalization of world markets continues,
competition intensifies among multinational and homebased companies
• The marketing manager’s responsibility is to set and
control the actual price of goods in different markets in
which different sets of variables are to be found
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Pricing Policy
Pricing Objectives
• Pricing as an active instrument of accomplishing
marketing objectives
- The company uses price to achieve a specific
• Pricing as a static element in a business decision
- Exports only excess inventory
- Places a low priority on foreign business
- Views its export sales as passive contributions to sales
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Pricing Policy
Parallel Imports
• Occurs whenever price differences are greater than the
cost of transportation between two markets
• Major problem for pharmaceutical companies
• Exclusive distribution
Parallel imports develop when importers buy
products from distributors in one country and sell
them in another to distributors who are not part of
the manufacturer’s regular distribution system.
12 - 116
How Gray-Market Goods End up in U.S. Stores
• Insert Exhibit 18.1
12 - 117
Approaches to International Pricing
Full-Cost versus Variable-Cost Pricing
• Variable-cost pricing – the firm is concerned only with
the marginal or incremental cost of producing goods to
be sold in overseas markets.
• Full-cost pricing – companies insist that no unit of a
similar product is different from any other unit in terms
of cost and that each unit must bear its full share of the
total fixed and variable cost
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Approaches to International Pricing
Skimming versus Penetration Pricing
• Skimming – a company uses when the objective is to
reach a segment of the market that is relatively price
insensitive and thus willing to pay a premium price for
the value received.
• Penetration pricing policy – used to stimulate market and
sales growth by deliberately offering products at low
12 - 119
Price Escalation
• Costs of exporting
- Price escalation
• Taxes, tariffs, and administrative costs
- Tariff – fee charged when goods are brought into a
country from another country
- Administrative costs include export and import
licenses, other documents, and the physical
arrangements for getting the product from port of
entry to the buyer’s location
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Price Escalation (continued)
• Inflation
- In countries with rapid inflation or exchange
variation, the selling price must be related to the cost
of goods sold and the cost of replacing the items
• Deflation
- In a deflationary market, it is essential for a company
to keep prices low and raise brand value to win the
trust of consumers
• Exchange rate fluctuations
- No one is quite sure of the future value of currency
- Transactions are increasingly being written in terms
of the vendor company’s national currency
12 - 121
Price Escalation (continued)
• Varying currency values
- Changing values of a country’s currency relative to
other currencies
- Cost-plus pricing
• Middleman and transportation costs
- Channel diversity
- Underdeveloped marketing and distribution channel
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Sample Causes and Effects of Price Escalation
• Insert Exhibit 18.3
12 - 123
Approaches to Lessening Price Escalation
• Lowering cost of goods
• Lowering tariffs
• Lowering distribution costs
• Using foreign trade zones to lessen price escalation
• Dumping
12 - 124
Leasing in International Markets
• Opens the door to a large segment of nominally financed
foreign firms that can be sold on a lease option but might
be unable to buy for cash
• Can ease the problems of selling new, experimental
equipment because less risk is involved for the users
• Helps guarantee better maintenance and service on
overseas equipment
• Helps to sell other companies in that country
• Revenue tends to be more stable over a period of time
than direct sales would be
12 - 125
Countertrade as a Pricing Tool
• Why purchasers impose countertrade:
- To preserve hard currency
- To improve balance of trade
- To gain access to new markets
- To upgrade manufacturing capabilities
- To maintain prices of export goods
- To force reinvestment of proceeds from weapons
12 - 126
Countertrade as a Pricing Tool (continued)
• Types of countertrade
- Barter
- Compensation deals
- Counterpurchase or offset trade
- Product buyback agreement
12 - 127
Countertrade as a Pricing Tool (continued)
• Problems of countertrading
- Determining the value of and potential demand for the
goods offered
- Barter houses
• The Internet and countertrading
- Electronic trade dollars
- Universal Currency/IRTA
• Proactive countertrade strategy
- Included as part of an overall market strategy
- Effective for exchange-poor countries
12 - 128
Transfer Pricing Strategy
• Benefits:
- Lowering duty costs
- Reducing income taxes in high-tax countries
- Facilitating dividend repatriation when dividend repatriation is
curtailed by government policy
• Arrangements for pricing goods for intracompany transfer:
- Sales at the local manufacturing cost plus a standard markup
- Sales at the cost of the most efficient producer in the company
plus a standard markup
- Sales at negotiated prices
- Arm’s-length sales using the same prices as quoted to
independent customers
12 - 129
Price Quotations
• May include specific elements affecting the price:
- Credit
- Sales terms
- Transportation
- Currency
- Type of documentation required
• Should define quantity and quality
12 - 130
Administered Pricing
• Cartels
- Exists when various companies producing similar products or
services work together to control markets for the types of goods
and services they produce
- Example: OPEC
• Government-influenced pricing
Establish margins
Set prices and floors or ceilings
Restrict price changes
Compete in the market
Grant subsidies
Act as a purchasing monopoly or selling monopoly
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• Pricing is one of the most complicated decisions areas encountered by
international marketers.
• International marketers must take many factors into account, not only for
each country, but often for each market within a country.
• Market prices at the consumer level are much more difficult to control in
international than in domestic marketing.
• Controlling costs that lead to price escalation when exporting products
from one country to another is one of the most challenging pricing tasks
facing the exporter.
• Countertrading is an important tool to include in pricing policy.
• Pricing in the international marketplace requires a combination of intimate
knowledge of market costs and regulations, an awareness of possible
countertrade deals, infinite patience for detail, and a shrewd sense of
market strategy.
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Negotiating with
International Customers,
Partners, and Regulators
lecture 14
International Marketing, 13/e
© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
Learning Objectives
• The problems associated with cultural stereotypes
• How culture influences behaviors at the negotiation table
• Common kids of problems that crop up during international
business negotiations
• The similarities and differences in communication behaviors in
several countries
• How differences in values and thinking processes affect
international negotiations
• The important factors in selecting a negotiation team
• How to prepare for international negotiations
• Managing all aspects of the negotiation process
• The important of follow-up communications and procedures
12 - 134
Global Perspective
A Japanese Aisatsu
• Face-to-face negotiations are an omnipresent activity in
international commerce.
• Executives must also negotiate with representatives of
foreign governments.
• A crucial aspect of all international commercial
relationships is the negotiation of the original agreement.
• If cultural differences are taken into account, business
agreements can be made that lead to long-term, profitable
relationships across borders.
12 - 135
The Dangers of Stereotypes
• Negotiations are conducted between people, not national
• Cultural factors often make huge differences
• Negotiation behaviors are different across regions,
genders, and type of industry
• Age and experience also make important differences
• Consider the culture of customers and business partners,
but treat them as individuals
12 - 136
The Pervasive Impact of Culture on Negotiation
• Regional generalizations very often are not correct
• Cultural differences cause four kinds of problems in
international business negotiations:
- Language
- Nonverbal behaviors
- Values
- Thinking and decision-making processes
12 - 137
Differences in Language and Nonverbal
• Americans are near the bottom of the languages skills list
• Americans don’t like side conversations by foreigners in
their native language
• The variation across cultures is greater when comparing
linguistic aspects of language and nonverbal behaviors
than when the verbal content of negotiations is
12 - 138
Differences in Language and Nonverbal
Behaviors (continued)
• Japan
• Korea
• China (northern)
• Taiwan
• Russia
• Germany
• United Kingdom
• Spain
• France
• Brazil
• Mexico
• French-speaking Canada
• English-speaking Canada
• United States
12 - 139
Differences in Values
• Objectivity
- “separating people from the problem”
• Competitiveness and equality
- Japanese appear to be the best negotiators with the
highest profits
- Japanese appear to be more equitable with buyers
• Time
- The passage of time is viewed differently across
- These difference most often hurt Americans
12 - 140
Cultural Differences in Competitiveness and
• Insert Exhibit 19.3
12 - 141
Differences in Thinking and Decision-Making
• Western approach: sequential
• Eastern approach: holistic
• Americans: business negotiation is a problem-solving
• Japanese: a business negotiation is a time to develop a
business relationship with the goal of long-term mutual
12 - 142
Implications for Managers and Negotiators
Four steps for more efficient and effective international
business negotiations:
Selection of the appropriate negotiation team
Management of preliminaries, including training,
preparations, and manipulation of negotiation settings
Management of the process of negotiations
Appropriate follow-up procedures and practices
12 - 143
Negotiation Teams
• Willingness to use team assistance
• Listening skills
• Influence at headquarters (senior executive)
• Gender should not be used as a selection criterion for
international negotiation teams
12 - 144
Negotiation Preliminaries
Checklist for planning international negotiations:
1. Assessment of the situation and the people
2. Facts to confirm during the negotiation
3. Agenda
4. Best alternative to a negotiated agreement (BATNA)
5. Concession strategies
6. Team assignments
12 - 145
Negotiation Preliminaries (continued)
Aspects of the negotiation setting that should be premanipulated:
1. Location
2. Physical arrangements
3. Number of parties
4. Number of participants
5. Audiences (news media, competitors, fellow vendors,
6. Communications channels
7. Time limits
12 - 146
At the Negotiation Table
1. Nontask sounding
2. Task-related exchange of information
3. Persuasion
4. Concessions and agreement
12 - 147
Nontask Sounding
• Learn the mood of the other side
• Learn about the client’s background and interest for cues about
appropriate communication styles
• Judgments about the “kind” of person in the negotiation
12 - 148
Task-Related Information Exchange
Let the foreign counterparts bring up business
Expect a large number of questions but little feedback
Allow periods of silence
Use multiple communication channels
Understand the lack of, or the bluntness of negative feedback
Meet aggressive first offers with questions, not anger
12 - 149
• Task-related information exchange versus persuasion
• Avoid threats, warnings, and other aggressive negotiation
• Avoid emotional outbursts
• Ask more questions
• Use third parties and information channels of
12 - 150
Concessions and Agreement
• Write down concession-making strategies
• Understand differences in decision-making styles
• In many cultures, no concessions are made until the end
of the negotiations
12 - 151
After Negotiations
• In most countries other than America, legal systems are
not depended upon to settle disputes
• Japan – contacts primarily contain comments on
principles of the relationship
• China – contracts are more a description of what business
partners view their respective responsibilities to be
• Many foreign CEOs expect a formal contract signing
• Follow-up communications are very important
12 - 152
• Experience levels are going up worldwide
• Culture still counts
• Differences between countries and cultures, no matter
how difficult, can be worked out when people talk to
each other in face-to-face setting
12 - 153
• It is important to take cultural differences into account when
meeting clients, customers, and business partners across the
international negotiation table.
• Negotiators’ personalities and backgrounds influence their
behavior, making it important to get to know the individuals
who represent client and customer companies.
• Four kinds of problems frequently arise during international
business negotiations: level of language, nonverbal behaviors,
values, and thinking and decision-making processes.
• Much care must be taken in selecting negotiating teams.
• Situational factors such as the location for meetings and the
time allowed must be carefully considered and managed.
12 - 154
Summary (continued)
• Business negotiations involve four steps: nontask sounding,
task-related information exchange, persuasion, and
concessions and agreement.
• The time spent on each step can vary considerably from
country to country.
• Because Americans tend to be deal oriented, more care should
be taken in follow-up communications with foreign clients and
partners who put more emphasis on long-term business
12 - 155